Aare Tark: every government now faces a challenge of three crisis

When government changes, the focus is often on internal matters and the several biggest challenges we face are no longer of national importance, writes Aare Tark, a sworn attorney, in response to a survey of opinion leaders by the Äripäev newspaper.

Humanity is, all at once, going through three major crises – an environmental crisis, the pandemic, and a recession. Estonian domestic policy, US elections, and the COVID-19 pandemic have distracted media attention from environmental issues, but this does not mean that we have been able to make any kind of substantial change or find solutions for related problems. According to the World Bank’s gloomy statistics, Estonia takes second place in Europe, producing 14 tons of CO2 per person, per year.

We cannot just shrug it off and remain bystanders. The new government must demonstrate to our people, that we can ensure the country’s energy security, and at the same time reduce the impact of global warming and climate change. Here, of course, synchronization with the Continental-Europe frequency range and other ongoing projects are of vital importance, but there is also the option of a wider consideration by the new generation of nuclear energy.

Economic growth may not become a reality

The new government takes office at an extremely complicated moment, where the lives of many people are in real danger. The pandemic shows no signs of fading away. Thanks to the significant efforts of the health system and all medical personnel, we have avoided the worst-case scenarios, but now it is important to ensure that vaccine doses are available and administered. The speed and scope of vaccination varies from country to country, and Estonia is, unfortunately, not at the forefront in this. To date, 26% of the population has been vaccinated in Israel, and 6% in England. In Estonia, the number is less than 2%. In this regard, serious efforts are expected from the incoming government.

According to the economic forecast of the Bank of Estonia, in 2021 a growth of 2.9% will replace the recession of the previous year, providing that the vaccination proves successful. However, this does not mean that we can feel unconcerned about the economy. The new government faces both short-term and long-term issues.

In the short-term perspective, it is important to lend a helping hand to businesses whose activities the coronavirus pandemic significantly restricted, and who, therefore, suffered the greatest losses. The unemployment rate has increased by 97% compared to the same period last year, and people who lost their jobs in the spring are now about to lose their social benefits, which puts a lot of families in a very complicated situation.

In the mid-term perspective, it is of the utmost importance to rebalance public finances. Dealing with the coronavirus crisis has increased the debt burden of many countries, Estonian bond issues and loans from the Council of Europe Development Bank, the Nordic Investment Bank and others not being an exception. As political forces are now back in government, who previously kept the Estonian economy in good shape for a long period, entrepreneurs have great expectations of this government to make responsible decisions for the country’s financial management and not live in the debt of billions at the expense of our children’s generation.

In the long-term perspective, it is imperative to address the structural labor shortage that is straining the economy. The pandemic has, all at once, made us extremely aware of how dependent we are on foreign labor. We still remember the shortage of workforce in our agricultural sector last summer.

In June, Roomet Sõrmus, the chairman of the Board of the Chamber of Agriculture and Commerce, admitted that we would have an immediate need for 500 berry pickers. Besides agriculture, the labor shortage has also hit the construction business, logistics (truck drivers), ICT, and many other areas.

The burning issue of labor force

Although the working age population in Estonia is declining, we are, according to the prognosis of the Ministry of Finance and the Bank of Estonia, able to maintain the number of local employed people at 659,000 until at least 2026. However, this is not sufficient, given that the state faces the need to carry out major investments at the same time – Rail Baltica, the reconstruction of main roads into 4-lane roads, the reconstruction of existing railroads, the initiation of large-scale production with high added-value, and the further development of the high tech and construction sectors.

We clearly need to create regulations for bringing in (both during the pandemic and after) a temporary labor force that would enable us to cope both with large-scale infrastructure construction and seasonal works. Given that we also have considerable structural unemployment at the same time, there is a need to ensure quick large-scale retraining. In the long-term perspective, the much more complex yet no less important issues are an increase of productivity and supporting longer working lives.

Loans taken can be repaid at the expense of the GDP or the increase of tax revenues. For that to happen, businesses must be able to operate and the economy to develop, although the shortage of a labor force hangs as a milestone around the economy’s neck. The question is – How and what kind of workforce will there be to employ to maintain our competitive-edge and economic development – and we expect the new government to answer this in the long run.


Aare Tark
Law Firm TARK Senior Partner


The article was originally published January, 22 2021 in Estonian business newspaper Äripäev